Issues

Prevailing Wage

The state Senate and Assembly are considering legislation in Albany that would require electric and gas utilities to pay prevailing wages to all contracted service employees. It also makes the willful failure to file payroll records with the appropriate public agency a class E felony, and increases criminal penalties for failure to pay service work prevailing wages.

Similar legislation was vetoed by then-Governor David Paterson in 2010. In his veto message, Paterson stated that the bill would increase utility costs as the state was struggling to recover from a lingering recession.

Con Edison opposes the bill because it would increase customer costs and subsidize wages for one specific group of workers. Additionally, it will impose costly administrative monitoring and compliance burdens on the company as well as local governments.

Specifically, utilities would be required to collect extensive data on their service contracts, maintain and audit weekly payroll records from contractors, determine the number of hours worked, each employee’s pay rate, and benefit payments made.

Finally, the measure could harm many small and minority-owned entities. These companies are often able to compete with larger competitors by submitting more cost-effective service bids. New wage mandates imposed by the bill could threaten the cost advantage that these smaller, community-based contractors might need to remain competitive.

The Center for Urban Real Estate (CURE) - Graduate School of Architecture, Planning and Preservation of Columbia University

Executive Summary:

As Americans—but especially New Yorkers—worry about a stalled economy and crumbling infrastructure, it is appropriate to examine the regulatory burdens government imposes upon itself, and thus upon the public. A wide range of environmental, labor, and procurement rules increase the price and slow the delivery of essential government projects and services without providing any discernible increase in their quality. Prevailing wage legislation—which intends to mandate the payment of typical private-sector wages and benefits on contracts for public construction and building services—is such a case.

Proponents argue that New York State’s prevailing wage law should encompass all projects, buildings, and construction sites that have any government participation. Opponents argue that further extension of prevailing wage will prove destructive economically by driving labor costs up to unsustainable levels, reducing the creation of new jobs, discouraging capital investment, and lowering tax revenues. Moreover, with prevailing wage rates generally far higher than local average rates—as much as twice as high, before counting fringe benefits that can add another 70 percent on top—the public dollar buys fewer actual projects delivered under these regulations.

Over the last five years, New York has experienced significant policy debate over extending its prevailing wage regulations from projects clearly defined and understood as public work to government-regulated projects, such as utility infrastructure, and various government-subsidized projects, such as affordable housing and business improvement districts.

This study looks at the questionable validity of New York’s prevailing wage methodology.